Series Introduction: This article is part of a 10-part series to shed some light on what your solar salesperson is NOT telling you. It is my hope this will help consumers to better understand the “small print” items when deciding if installing Solar panels is the right decision for you and your family.
Solar Panels have recently become more affordable and easier to obtain for homeowners. It is hard not to get sucked in by commercials with uplifting oldies blaring and people dancing and singing the praises of a Solar Life with the spokesperson declaring it is now an affordable option for homeowners. As a REALTOR® I have been asked by many past and present clients if they should do this? This series will cover the following issues of the solar home craze. You can also click topics below to jump to that particular topic.
What’s the catch?
Potential savings or smoke and mirrors
What’s the real cost?
Life expectancy and maintenance mortgage and appraisal pitfalls
How does this affect my homeowner’s insurance?
What sellers need to know?
What home buyers need to know?
Less expensive alternatives to solar panels.
Why I made the decision I made regarding Solar Panels.
How will this effect my mortgage?
I asked the salesman what would happen if I sold my house. This is a secured lien against my property for $73,180. What he said is, “the new homeowner is usually happy to take on this cost”. Whoa, wait a minute here. I’m a REALTOR® and I know the dynamics of how this works. For those of you who are interested let me explain.
A homebuyer goes to a lender and gets pre-qualified for a certain amount of money. That amount is based on an in-depth review of income, expenses, current debt & credit score. When you secure a pre-approval to purchase a $200,000 home it does not mean a $200,000 home AND a loan to pay off the lien on the Solar system.
This would also impact the buyer’s debt to income ratios which could mean they need to buy a lower priced home. Even though a buyer may be saving some money on electricity their lender is not estimating utility costs when they are estimating the loan that the buyer qualifies for.
I spoke with Nancy Crawford of USA Mortgage about how this might impact a home buyer. Nancy said Interest rates are based on equity in a home. As a REALTOR® I see many people buying today with less than 20% down, often less than 10% down. Adding $73,000 to the loan would mean a buyer would need to be buying a $500,000 home to sacrifice 10% of the equity (or $50,000). The math becomes far more complicated on a lower priced home. Nancy Crawford went on to say, “One of the questions you are asked at closing, is are there any other loans that you know of against this property. If you answer yes it could jeopardize your loan completely, if you say no, knowing this is in place, you are committing mortgage fraud.”
It is unlikely this lien wouldn’t show up in the title search of the property so it will have to be addressed. Most likely the seller will pay off this loan at closings with proceeds from the sale which means less cash to the seller.
Will this increase my appraised value?
Fannie Mae has clear guidelines for appraisers on appraisals of a home with Solar Panels. REALTORS® should take note that documentation is required in some instances in order for the appraiser to be able to assign value to the panels. Special documentation should be provided for the buyer as a part of the contract so the appraiser sees this documentation, or the solar panels might get missed with no value added for the panels. Personally, I recommend adding a special list of questions for your sellers to answer when Solar panels are involved. This causes me to further ponder how this might affect county assessments on valuation moving forward as well. But that is a discussion for another time.
I talked to a professional appraiser and asked how she determined value for a home that has solar panels. For example, when you remodel a kitchen you can typically get between 80% and 100% of the cost back because an updated kitchen is desirable. Bathrooms also get a lot of “bang for the buck”. Other upgrades don’t have the same impact. When a Seller puts in more insulation does not have the same value increase. Probably because people expect the house to have good insulation.
It begs the question, do solar panels increase the value of my home. The appraiser said, think of solar panels like a swimming pool. Some people will like it and it will be worth a bit more money to them and some people won’t like it and they won’t pay more for a home with a swimming pool, or they might not be interested in the house at all. The solar company who provided my bid referenced an article from Berkley Labs on how Solar increases the value.
The article states that it adds $15,000 in additional value. Interesting, because the cost of the system is $73,000. A home that was appraised at $200,000 before solar panels is now a home worth $215,000 with solar panels. So how do you recoup the cost of the system…Sounds like you don’t. Bottom line if you plan on moving in the next 30 years don’t finance those panels and don’t expect them to add much value to your home.
Hopefully you found this to be a helpful series, I would love to see your comments and hear about your experiences so others can benefit from your stories as well. Direct links to each topic in this series. Also, I would love for you to subscribe to be notified when new posts are available or follow. Look on the top right to do that.
SOLAR PANELS – What’s the catch?
SOLAR PANELS – Potential savings or smoke and mirrors
SOLAR PANELS – What’s the real cost?
SOLAR PANELS – Life expectancy and maintenance
SOLAR PANELS – How does this affect my homeowner’s insurance?
SOLAR PANELS – What sellers need to know?
SOLAR PANELS – What home buyers need to know?
SOLAR PANELS – Mortgage and appraisal pitfalls
SOLAR PANELS – Less expensive alternatives to solar panels.
SOLAR PANELS – Why I made the decision I made regarding Solar Panels.
Have you thought about selling your home?
What if I told you I could sell it for more than it is worth?
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You can always browse area homes for sale here
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